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Back to the Future with Management by Objectives

The management-leadership field, as vast as it is with perspectives and theories aplenty, still finds a need to recycle ideas from the past. There are only so many ways to slice and dice theories on how to motivate people; manage–make that lead–them; and link the organization’s mission, vision and operating goals to employee development and performance.

It’s clearly a task for Superman, or Superwoman. Indeed, it was McGill University management guru Henry Mintzberg who made reference to this many years ago in a CBC interview. Mintzberg’s point was that society has unnecessarily high expectations of those holding managerial leadership positions, making Superman’s abilities pale in comparison.

Here we go again with another management method, or fad if you wish, which is stealthily finding its way back into the management mainstream: Management by Objectives, or MBO as it was affectionately called back when the concept was created in 1954 by legendary management thinker Peter Drucker.

Published in 1954, The Practice of Management was subsequently developed by one of Drucker’s students, George Odiorne, who died in 1992 after a career of working in academia, preceded by experience working as a foreman in factories.

The popularization of MBO in organizations in the sixties and seventies produced a juggernaut of literature, from books and journal articles to training courses and certification. Yes, you can achieve certification in specific fields under the rubric of management by objectives, such as with this organization’s IT certification process.

Management by Objectives became almost a religion in organizations during this period, given its focus on objective-setting for employees, tied to the organization’s broader mission goals. MBO received a major shot in the arm when Hewlett-Packard adopted the concept as an important part of its The HP Way. Managers were expected to develop objectives that fit with those of their peers in their organization. This required a massive planning exercise to ensure that all employees were on the same page.

Of strange coincidence, one of Drucker’s peers was critical of his MBO theory and its practice in organizations: W. Edwards Deming (pictured), who achieved world-fame recognition for his rigorous application of statistics to production processes and quality management. In fairness to Drucker, and Odiorne by attachment, Deming’s complaint was more linked to the loose application of MBO principles by organizations and consultants, which adapted them to such notions as performance standards and indicators.

Briefly, management by objectives may be viewed as a circular flow consisting of five key steps. The first step is reviewing the organization’s goals by the manager. This is followed by the manager meeting with the staff member to, in current vocabulary, engage them in the process and to set their objectives and identify resources.

In step three, as implementation of the plan proceeds monitoring of performance is carried out, with periodic check-ins with the employee. Then in step four the employee is evaluated by the manager to determine whether the objectives were achieved and on time. This forms the performance appraisal.

Finally, in step five recognition and rewards are done, based on the success of the employee’s accomplishments. And the process begins once again.

Fast forward to today’s corporate world, characterized by increased volatility due to geo-politics, technology’s impact on how business is being conducted and where geographically, and the rise of newly developed economies.

Does MBO have any chance of recapturing the serious attention of corporate leaders, both in the public sphere and in business?

Some important considerations need attention before enrolling in 21st Century Management by Objectives.

First, as alluded to above, the world is becoming an increasingly messy place in which to do business and to govern in the public sector. One of the critical competencies today for senior leaders is to develop and maintain their organization’s ability to adapt to change, especially major unexpected events, whether geo-political, environmental or economic. And because MBO in its original conception was based on the presumed infallibility of objective setting, applying this in today’s world would be an exercise for the naïve and foolhardy.

Second, the demographics card is a powerful reckoning force, specifically the very different values, expectations and work ethics of Generation Y (Millennials), now between 20 and 34. Their more fluid and socially interactive approach to work by incorporating technology, combined with their continuous need for feedback and reinforcement, and their dislike for authoritative management, present distinct challenges for a back-to-the-future MBO re-introduction.

And third, one of the big criticisms of MBO back in its heyday was that it caused managers to focus too much on the “objectives” and not enough on the bigger picture. Tinkering with the objectives and becoming overly attached to the present undermined what was actually important to the organization. Transfer this sentiment to today’s socio-economic, geo-political turbulence and you have a potential disaster awaiting organizations that become fixated on a rigorous MBO approach.

Management by objectives was never a tried and true method, but one that fit the context of the day–to a point. Rather than trying to adapt MBO to today’s corporate world, it’s best left to theorists to play with in their labs.

Take a moment to share your views or experiences with MBO.

MBO is just another tool. It is not the great cure for management inefficiency. …Management by objectives works if you know the objectives: 90% of the time you don’t.
– Peter Drucker